Correlation Between MFF Capital and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both MFF Capital and Commonwealth Bank at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining MFF Capital and Commonwealth Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MFF Capital Investments and Commonwealth Bank, you can compare the effects of market volatilities on MFF Capital and Commonwealth Bank and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in MFF Capital with a short position of Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFF Capital and Commonwealth Bank.
Diversification Opportunities for MFF Capital and Commonwealth Bank
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between MFF and Commonwealth is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding MFF Capital Investments and Commonwealth Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and MFF Capital is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on MFF Capital Investments are associated (or correlated) with Commonwealth Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Bank has no effect on the direction of MFF Capital i.e., MFF Capital and Commonwealth Bank go up and down completely randomly.
Pair Corralation between MFF Capital and Commonwealth Bank
Assuming the 90 days trading horizon MFF Capital Investments is expected to generate 0.81 times more return on investment than Commonwealth Bank. However, MFF Capital Investments is 1.23 times less risky than Commonwealth Bank. It trades about 0.29 of its potential returns per unit of risk. Commonwealth Bank is currently generating about 0.14 per unit of risk. If you would invest 373.00 in MFF Capital Investments on September 12, 2024 and sell it today you would earn a total of 70.00 from holding MFF Capital Investments or generate 18.77% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
MFF Capital Investments vs. Commonwealth Bank
Performance |
Timeline |
MFF Capital Investments |
Commonwealth Bank |
MFF Capital and Commonwealth Bank Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MFF Capital and Commonwealth Bank
The main advantage of trading using opposite MFF Capital and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFF Capital position performs unexpectedly, Commonwealth Bank can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Commonwealth Bank will offset losses from the drop in Commonwealth Bank's long position.MFF Capital vs. Retail Food Group | MFF Capital vs. Duxton Broadacre Farms | MFF Capital vs. Black Rock Mining | MFF Capital vs. Dexus Convenience Retail |
Commonwealth Bank vs. Aristocrat Leisure | Commonwealth Bank vs. Hawsons Iron | Commonwealth Bank vs. Red Hill Iron | Commonwealth Bank vs. Legacy Iron Ore |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stocks Directory module to find actively traded stocks across global markets.
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